Société Générale close to signing first councils to new custody service
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Photo (cropped): Mustapha Ennaimi, Flickr
Société Générale says it is close to signing up the first local authorities for a new custody service tailored for the council market.
The French bank has launched a new service which operates on a pay-as-you-use basis, rather than charging up front.
Developed with broker RP Martin, the new product is set to compete with custody services offered by other firms including investment firm King and Shaxson and recent market entrant Traderisks.
Jeff Harvey-Wells, head of sales, global broker-dealer services at Société Générale Securities Services, told Room151, that the size of the council market was a draw.
“Collectively, the scale of local authorities makes them more interesting than individually,” he said.
“We sat down with RP Martin who helped us understand what the market was looking for and we put together a standard contract with them.”
The custody account offers a standard charge and contract terms for all authorities.
Harvey-Wells said SocGen was “not necessarily the cheapest” but could offer “more flexibility”.
He said that SocGen is taking a different approach to charging than alternative custody offerings.
“Historically, the marketplace has charged authorities in advance for assets they hold.
“We only charge for what they hold at the end of each month, so they are only paying for what they use if their strategy changes.”
Most investments outside of bank deposits require them to be held by a custodian on behalf of investors.
Often, asset certificates only exist electronically, known as “dematerialised form”.
Currently, the vast majority of such treasury investment transactions made by local authorities are held in custody with the transacting broker.
Mike Jensen, co-chief investment officer at the Local Pensions Partnership, said: “SocGen is particularly strong in derivatives trading broking and clearing/custody so the new derivatives freedoms may have piqued their interest.”
Two other banks – BNP Paribas and FNZ (UK) are also understood to be marketing themselves within the local authority custody market, according to market experts.
In addition, a handful of Local Government Pension Scheme funds currently provide custody services to their own local authority treasury departments.
